tech industries offshored at rates
higher than 40%, and IT work was
the most commonly offshored type
of work. IT workers in the U.S. have
experienced offshoring-related displacement at a rate of 8%, more than
double the percentage in other occupations. Firms offshore for a number
of reasons, but IT workers appear to
be offshored primarily for cost or access to skills. Therefore, compared
to sales workers offshored to provide
customer contact to overseas markets, the offshoring of IT workers
should lead to greater displacement
of U.S.-based IT workers. Our results
also provide empirical support for the
hypothesis proposed in earlier work4
that employees in jobs requiring face-to-face contact or physical presence in
a fixed location are less likely to be offshored. This suggests that IT workers
are especially vulnerable to offshoring
because IT jobs generally require less
customer contact or interaction with
fixed physical assets.
Our estimates imply an average dis-
placement rate of about 1% per year
for U.S.-based IT workers. However, as
offshoring grows more popular, our
findings, which suggest that workers
who do not provide personal services
are being displaced at a higher rate,
are consistent with emerging work
providing evidence for a potentially
significant long-term shift in the rela-
tive demand for skills within the IT
labor market. 23 These results suggest
that technical occupations reliant on
skills that can be delivered with rela-
tively little face-to-face contact are
more easily offshored. Other schol-
ars have noted that interpersonal or
managerial skills are increasingly
valuable for IT workers, 13, 17 so our
findings suggest that offshoring will
continue to drive a secular increase in
the direction of this trend. IT workers
concerned about offshoring-related
displacement may find more robust
career paths in IT professions that re-
quire personal delivery.
table 7. Probit analysis, worker displacement.
all
Workers
Probit
estimates
all
Workers
Probit
estimates
all
Workers
Probit
estimates
all
Workers
marginal
effects
it Workers
only
Probit
estimates
Probit Displacement
from offshoring
Impersonala
Job Level
Salary
Male?
Age
number of employees
( 1)
.007
(.002)**
–. 103
(.048)*
–.048
(.023)*
.137
(.062)*
.197
(.040)**
–.001
(.001)
controls
( 2) ( 3)
.004 .004
(.002)* (.002)**
–.095 –.092
(.049)* (.050)*
–.059 –.056
(.024)** (.025)*
.066 .070
(.065) (.067)
.194 .195
(.041)** (.043)**
–.001 –.000
(.001) (.001)
Industry Industry
State race
.06
5,790
( 4)
.011
(.002)**
–.006
(.003)**
–.130
(.059)**
.006
(.003)**
.014
(.003)**
–.002
(.003)
( 5)
.000
(.004)
–.231
(.172)
–.021
(.058)
–.138
(.183)
.319
(. 103)**
.003
(.003)
Pseudo-r2 .03 .05
n 5,790 5,790
Standard errors are in parentheses, **p<.01 *p<.05
.06
5,471
.04
672
a composite skill index from blinder. 4 Higher values indicate less face-to-face contact or physical
presence needed for job.
adverse consequences of offshoring
should be concerned with the potential growth of offshoring rather
than the existing level of offshoring-related displacement. Annual rates
of offshoring-related displacement
in the survey were on the order of
10% of aggregate IT-worker turnover.
While unclear at what level offshoring
shifts from a trend affecting mostly
individual workers to a concern for all
workers in an occupation, the trends
should be measured and monitored.
Proposed policy interventions attempting to reduce the adverse effects of worker displacement (such
as worker retraining and government
compensation to offset wage losses
associated with moving to new industries) could focus on specific occupations. Furthermore, training
programs could focus on the movement of displaced workers toward
work that combines existing skills
with those that involve elements of
personal delivery. Private or public
educational institutions can potentially adjust their curricula to address
table 8. Probit analysis of outcomes for
all displaced workers.
Probit
estimates
marginal
effects
( 1) ( 2)
Impersonala .012 .060
(.006)** (.029)**
Job Level -.180 -.038
(.180) (.038)
Salary .097 .863
(.087) (.772)
Male -.357 -.050
(.217) (.030)
Age -.193 -.044
(.145) (.032)
controls Industry Industry
Pseudo-r2 .09 .09
n 222 222
Standard errors in parentheses. p<.01
Separated
from firm
a composite skill index taken from blinder. 4
Higher values indicate less face-to-face
contact or physical presence needed for job.
n=222.57 employees retained by their
employers after job displacement.